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Investing.com - HSBC downgraded Electronic Arts (NASDAQ:EA) from Buy to Hold on Monday, maintaining a price target of $191.00. The gaming giant, currently valued at $50.7 billion, has seen its stock surge to $202.61, setting new highs near its 52-week peak.
The downgrade comes as HSBC analyst Mohammed Khallouf cited limited upside potential with the stock trading near the firm’s target price, noting approximately 1% downside to the current market price. InvestingPro analysis supports this cautious stance, with technical indicators suggesting overbought conditions and elevated valuation multiples across multiple metrics.
HSBC’s analysis references the broader context of consolidation in the video gaming industry, following Microsoft’s 2023 acquisition of Activision, and suggests that a potential acquisition of EA would leave Take-Two (NASDAQ:TTWO) as the last independent ’AAA’ games publisher.
The research note indicates that any EA acquisition could have a net positive impact on Take-Two by enhancing its scarcity value in public markets and highlighting it as an attractive potential acquisition target.
HSBC cautions that a larger role for PIF (Public Investment Fund), which currently owns approximately 10% of EA, could increase the financial resources of a major competitor at a time when video game production and marketing costs continue to rise.
In other recent news, Electronic Arts is set to be acquired by an investor consortium for $210 per share in cash, valuing the company at approximately $36 billion in equity. This consortium includes Saudi Arabia’s Public Investment Fund, Silver Lake, and Affinity Partners. Meanwhile, Benchmark has increased its price target for Electronic Arts to $250, maintaining a Buy rating, amid reports of a possible $50 billion privatization deal. In contrast, Wedbush has downgraded Electronic Arts from Outperform to Neutral, lowering its price target to $200, in light of the impending buyout. Freedom Capital Markets also downgraded Electronic Arts to Hold, while raising its price target to $195, citing a "rumored deal price."
Goldman Sachs has reiterated its Neutral rating with a $170 price target, following media reports about a potential privatization transaction valued at $50 billion. These developments indicate significant investor interest and analyst activity surrounding Electronic Arts. The potential privatization deal, if realized, would represent one of the largest leveraged buyouts ever completed.
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